After a few months of relative inactivity, we've seen some interesting SPAC deal announcements recently. And we recently learned that Yellowstone Acquisition Co. (NASDAQ: YSAC), a special purpose acquisition company sponsored by Boston Omaha Corp. (NASDAQ: BOMN), has identified the company it intends to take public.
With that in mind, here's what we know about Yellowstone's acquisition target, as well as what it could mean for shareholders of both Yellowstone and Boston Omaha.
Boston Omaha's newest investment
Yellowstone Acquisition Co.'s merger target will be Sky Harbour Group, a company that develops and leases business aviation hangar infrastructure at U.S. airports. The company has one operational campus in Texas, with two more under construction and another two in the planning stages.
The deal values Sky Harbour at $777 million, which includes up to $238 million in cash that the company is expected to receive as part of the business combination. And $138 million of this will come from the cash in Yellowstone's trust account, with another $55 million coming as a separate investment from Boston Omaha. In addition, Boston Omaha has committed to provide a $45 million "backstop" to ensure a minimum level of cash is provided to Sky Harbour.
While no concurrent PIPE investment round was announced, the company may end up raising more money this way. Plus, Sky Harbour is also planning an $80 million bond offering in September to raise additional capital.
What it means for investors
Yellowstone investors need to make a decision: If you want to be an investor in Sky Harbour, simply hold on to your shares until the business combination takes place, and they will automatically convert to Sky Harbour stock. If you don't want to invest in Sky Harbour, you have two choices -- sell your shares now, or elect to redeem your shares for approximately $10 each prior to the business combination (you'll receive a notice about this as the merger gets closer).
For Boston Omaha shareholders, this acquisition could turn out to be a major needle mover. Boston Omaha paid a total of just $7.8 million for about 7.5 million warrants to buy shares at $11.50 each, as well as about 3.6 million common shares of Yellowstone. As part of the merger deal, Boston Omaha has committed to buy at least 5.5 million more shares.
Here's what this means. Let's say that Sky Harbour is a success and its share price climbs to $20 in a year. Boston Omaha's investment, as outlined in the previous paragraph, would be worth about $246 million. A $30 share price would translate to a $412 million value. You get the idea. Boston Omaha has a market cap of less than $950 million, so if Sky Harbour is a winner, it could be a big deal for Boston Omaha investors.
What we don't know
It's important to point out that there's quite a bit we don't know yet. In addition to the general uncertainty surrounding the financing of the deal that I mentioned earlier, we also don't know much about the economics of Sky Harbour's business. How much revenue does its operational facility generate? How much does it project to earn from the four upcoming facilities? How large could the business scale? What types of gross margins can investors expect?
These are just a few examples of questions that remain unanswered after the initial press release announcing the deal. To be fair, the release also says that an investor presentation is yet to be uploaded, so we could certainly see some of these questions answered shortly. But for now, there's quite a bit we don't know.